The first quarter of 2026 is expected to reveal weak financial performances for European chemical companies, largely driven by the US-Israeli war with Iran. The conflict has severely disrupted feedstock and fuel markets, heavily impacting an industry that is fundamentally dependent on oil and gas. According to the German chemicals association VCI, this war-induced spike in energy prices has exacerbated existing struggles within a sector already facing supply chain bottlenecks and a broader economic slowdown.
In response to surging operational costs, major players like BASF, Brenntag, and Evonik have been forced to implement significant price increases across their product lines to protect profit margins. However, economic experts warn that this strategy is a double-edged sword. While some costs are currently being absorbed by customers, elevated prices in a climate of already sluggish demand risk stifling purchasing activity even further. Furthermore, this dynamic hands a distinct competitive advantage to Asian manufacturers, who benefit from structurally lower operating costs and are better positioned to weather the storm.
Despite the recently brokered two-week ceasefire offering a brief pause, analysts note that the industry is far from clear of danger. Energy markets remain highly volatile, and a rapid normalization of prices is deemed unlikely unless a long-term resolution to the conflict is firmly established.
